Investor Presentaiton

Appendix C Recent IFRIC agenda decisions IFRIC agenda decisions relate to financial reporting issues which have been brought to the attention of the IFRS Interpretations Committee (the Committee), where the Committee has decided not to add the issue to its work programme for further deliberation. Often the reason for this is because the Committee believes that existing IFRS requirements provide enough information to determine the accounting, and an agenda decision is published to explain how the applicable principles and requirements of the IFRS Accounting Standards apply to the question submitted. Although agenda decisions are technically non-authoritative as they reflect existing requirements of the Standards, the decisions are viewed as in-substance mandatory by major accounting firms and many regulators. The IFRS Foundations' Due Process Handbook notes that entities should be entitled to "sufficient time" to implement changes in accounting policy that result from an agenda decision published by the Committee. Although "sufficient time" depends on an entity's particular facts and circumstances, the IASB's expectation is that "companies need to consider agenda decisions and implement any necessary accounting policy changes on a timely basis - in other words, as soon and as quickly as possible". This appendix includes a summary of the IFRIC agenda decisions issued from January 2022 to August 2023, starting with the most recent decisions as of the time of writing. These decisions are published in IFRS Foundation's newsletter "IFRIC Update", which is published shortly after they are considered by the IASB and the IASB does not object to the agenda decision. The IFRS Foundation website also contains a compilation of past agenda decisions and recordings of the Committee's meetings. Considering that HKFRSS are derived from IFRS Accounting Standards word-for-word, entities preparing financial statements under HKFRSS or IFRS Accounting Standards are expected to change their accounting policies to align with the guidance in the final agenda decisions, to the extent their existing accounting policies materially differ from those described in the agenda decisions, and any such changes in accounting policies will be implemented in a timely manner. More information on these developments can be obtained from your usual KPMG contact. Meeting date Issue discussed by the Committee March 2023 IFRS 16 Leases - Definition of a lease - Substitution right: At which level should an entity assess whether a contract contains a lease? How to evaluate whether the supplier's substitution right is substantive? Summary of the Committee's conclusion on the issue The Committee concluded that, in the fact pattern described in the request, lease definition is evaluated at the level of each battery, and the supplier's substitution right is not substantive throughout the period of use. In particular, determining whether a supplier's substitution right is substantive throughout the period of use, as required by paragraph B14 of IFRS 16, may require judgement. While the term 'throughout the period of use' does not mean at all times within that period, in the fact pattern considered, the Committee observed that, because the supplier is not expected to benefit economically from exercising its substitution right for at least the first three years of the 10-year contract, the condition in paragraph B14(b) does not exist throughout the period of use. Therefore, the supplier does not have a substantive right to substitute a battery throughout the period of use. To assess whether the contract contains a lease, the customer would then apply the requirements in paragraphs B21-B30 of IFRS 16 to assess whether, throughout the period of use, it has the right to obtain substantially all the economic benefits from use, and direct the use, of each battery. If the customer concludes that the contract contains a lease, it would apply the requirements in paragraphs 18-21 of IFRS 16 to determine the lease term. 2 "Agenda decisions - Time is of the essence", an article written by the then vice-Chair of the IASB and published on the IFRS Foundation's website. C1 © 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.

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